Product Bundle Pricing

Product bundling is a marketing strategy with several uses and benefits (some of which are listed below). It involves selling multiple products or components together as a single, more holistic customer solution. Combinations commonly include main product components with their auxiliaries. It is therefore the alternative to selling a la carte. Common product bundles, often called 'packages' include the following.

• tickets for a cruise that include food, entertainment and destination tours (ie a main product with different but complementary products, ie 'cross-sell' products)
• the purchase of a professional camera that includes additional interchangeable lenses (ie a main product with others that amplify its value and functionality, essentially transforming the original basic product into a an 'up-sell version of itself product')
• offer deals based on minimum order volumes. Incentives may include free shipping or a gift that adds value 

Uses & Benefits

• To create pricing advantages since a single price can not be subject to line-by-line scrutiny (ie if a pricing breakdown for each component is excluded). Customers are unlikely to negotiate discounts when price product bundle pricing is used. After all, based on the brand, they are usually willing to pay the advertised price as they perceive it to offer value worthy of the single price. Bundles are particularly useful in pushing price-sensitive customers through the sales funnel more quickly.
• To provide perceived customer value regarding pricing simplicity (ie over numerous items that are priced individually which minimizes cognitive load in the buying decision-making process). Just consider how each credit card purchase is essentially an individual loan. However, a bank's single interest rate is a pricing bundle for all those loans whose calculations could make the average person's head spin.
• To up-sell items that buyers rarely use, especially for technical products. For instance, most people who buy the latest versions of entire software suites (like Apple, Microsoft, Adobe and so on) barely use more than the basic functions. Such purchases essentially finance the research and development of advanced functions for the few advanced / professional users who truly need advanced functions.
• To introduce new products within a product line.
• To up-sell items that enhance the overall perceived value of a single purchase. For instance, a dialysis customer looking for a home dialysis machine clearly has needs related to kidney health. Consequently, sellers can add value by offering water distillers that minimize the amount of his hard water intake is increasing the modes for value creation. This approach also adds value as it relates to added convenience.
• To increase your store's average order value. This is simply a matter of increasing sales volume, even if the a la carte sale value would have been higher. Bundling can be a strategic response to buyers' reservation prices.

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DOs & DON'Ts

• Do itemize the products, their unique value propositions, synergistic value propositions (but only a single price for the bundle). Customer perceived value is noteworthy because it is their primary purchase motivator. In fact, customers are usually willing to pay premiums for what they value and are therefore likely to perceive a bundle as an amazing deal. Additional, itemizing on the basis of component products and corresponding value also offers the sense of transparency that otherwise price-sensitive customers would seek. Common examples of value propositions include the following.
• Solutions: solve customer problems; prestige and image of unique products; satisfy business needs like cutting costs, raising profitability, etc
• Convenience: customer savings of time or money
• Do NOT provide itemized price breakdowns for individual products or components. This often turns off customers who may value components differently. For instance, a high end restaurant can use its brand to charge $120 for a meal with a $20 dessert. However, when shopping a la carte, when ordering the meal for $100, a customer is likely to be more resistant to buying the dessert for a separate $20. The only exception to itemizing price is that you may promote a main product bundled with something else that you call a 'free gift valued at $10', ie the retail value (which may even usually be $8 but not something someone will check or belly-ache over).
• Do analyze profitability for both bundled and unbundled options. Bundling is worthwhile only if both parties benefit; specifically if it generates higher profits for sellers and better solutions for customers.
• Do analyze your market's sensitivity to bundling with and without options to buy a la carte. Some people view bundling as pushy and even an unethical way of getting more money out of buyers. In that case, offering the option for individual product as well as bundled sales may be prudent. However, the key point is to gently help customers get more value and not aggressively push products only with your profitability in mind.
• Do use shelf-talkers and other sales promotion tools to communicate the advantage or value proposition of bundling, whether it is price advantage or otherwise (like functional benefits).

RELATED CONTENT

• Up-sell, Cross sell, Add-on and Bundle Product Offerings Explained, Compared, Contrasted & Effective Persuasion
• Add ons in Shopify without paid apps
• Minimum Advertised Pricing (MAP) and Manufacturer Suggested Retail Price (MSRP) an article by the US Small Business Administration. Value-based bundle pricing MAP and non-MAP products can sometimes counteract the effects of price-driven competition
• Bundling Decisions that consider the correlation of demand based on reservation price and marginal costs (third party video instructions)